Wu Xiaohui, the former car insurance salesman who turned Anbang Group into one of China’s biggest insurers and largest asset buyers, has been put on trial in Shanghai, the first of the nation’s major entrepreneurs to be prosecuted in a government crackdown on freewheeling deal makers.

Wu, who was removed from his post as Anbang chairman by the Chinese insurance regulator on February 23, appeared at the No. 1 Intermediate People’s Court in Shanghai, according to a live telecast of the proceedings via China’s Weibo social network.

He has been charged with illegal fundraising, fraud valued at US$10.4 billion, and embezzling US$1.6 billion from Anbang’s insurance premium income, which severely damaged “the safety of investors’ capital,” and “crushed national financial security,” according to the prosecutor.

Wu has contested all the charges and is defending himself. The one-day trial, which started at 10am and ended at 7pm, could take up to three months before delivering a verdict, according to the norms of China’s public trials.

Wu appeared in court in a suit, with more than 50 people in attendance, including his family members, delegates from the legislature the National People’s Congress and the media, according to the Weibo report.

Outside the courthouse in the city’s Changning district, security was lax, with overseas and local reporters gathering to await the trial’s verdict.

The court case closes a chapter in a series of investigations that have been mounted on Anbang and a handful of China’s biggest overseas asset buyers – known in China as “crocodiles” – since June 2017, in a government programme to pare back leveraged buyouts and rein in financial malfeasance.

Besides Wu, other tycoons including Xiao Jianhua, the founder and chairman of the sprawling financial conglomerate Tomorrow Holdings, are also waiting for Beijing to determine their destiny.

“The public handling of this case, in a Shanghai court, surely carries a message,” said Brock Silvers, managing director of Kaiyuan Capital, a Shanghai-based investment advisory firm. “It impresses upon China’s crocodiles that they must deleverage if they want to avoid Beijing’s attention. China Inc. has heard the message.”

Under Wu’s orders, Anbang had raised capital through selling wealth management insurance policies to 10.56 million policy holders, exceeding the regulator’s approved quota by 723.87 billion yuan (US$115.04 billion), according to the court.

An estimated 65.25 billion yuan of funds were diverted to Wu’s personal accounts for paying debt and for spending, the court heard, while another 10 billion yuan worth of insurance premium income was transferred to his personal company under Wu’s instructions in 2007 and 2011, according to prosecutors.

In his own defence, Wu objected to the facts cited in his charges, saying he did not understand Chinese law, and that he did not know whether his actions constituted crimes that could be punishable, according to the Weibo report. He acknowledged receiving the regulator’s notice, but disputed that Anbang had breached the regulatory quota.

A crime involving such financial magnitude could result in life imprisonment, said Benben Law Firm’s Liu Guohua in Guangzhou, who isn’t involved in the case, making a comment based on case law and precedents.

Regulators in banking, securities and insurance have worked together in cracking down on insurance policies with guaranteed returns – or wealth management products, of which Anbang is among the biggest sellers – that were used as war chests to finance hostile takeovers and acquisitions.

Anbang itself has been put under the ward of the state for at least a year since Wu’s downfall, with a team led by the China Insurance Regulatory Commission (CIRC) taking over the company’s daily operations. The regulator has the option to extend its supervision by another year, and will seek new investors to take it over.

“Wu Xiaohui is on trial for his personal crime,” said an announcement on Anbang’s website on Wednesday, signed by its regulatory administrator. “Business is normal under the regulatory supervision. Cash flow is sufficient to fulfil policy commitments and the legal interests of all policyholders will be guaranteed.”

Anbang, founded in 2004, had grown from a seller of car insurance into one of China’s largest insurance providers, creating a giant with more than 800 billion yuan in assets in a little over a decade.

That explosion in assets was fuelled by fraudulent financial statements, and breaches of the insurance regulator’s risk management benchmarks, according to a charge sheet on the Shanghai court’s website.

It leapt into the global limelight in 2014 with a US$2 billion acquisition of the Waldorf Astoria hotel in New York from the Blackstone Group. Two years later, it made an unsolicited US$14 billion bid to buy Starwood Hotels and Resorts Worldwide, mounting a takeover battle against the Marriott Group, which the Chinese company eventually conceded.

Between 2012 and 2016, Anbang had been involved in 14 acquisitions valued at US$25.22 billion. The shopping spree stopped in June when Wu was placed under investigation.